Credit demand bolstered by budget

Demand for asset finance has spiked as more small businesses take advantage of the federal government's $20,000 instant asset write-off tax benefit on new goods, which was announced in the May budget.

Credit data provider Veda says asset finance surged 6.7 per cent in the September quarter compared to a year earlier, building on the strength seen immediately after the tax initiative kicked in on budget night.

Asset finance was the standout in Veda's business credit demand index for the September quarter, which overall rose by just 1.6 per cent over the year, slowing from 3.7 per cent as of June.

Historically the index has been a lead indicator of how the overall economic performing.

"With growth in the Australian economy remaining below trend, moderate business credit growth should be seen as positive," Veda's Paul McFadden says.

Demand for business loans rose 1.8 per cent in the September quarter, but trade credit dropped 2.2 per cent.

However, while growth in national credit demand was moderate, NSW was a strong performer, leading all states and territories during the quarter due to growth in construction and housing.

The state's applications for business loans jumped 9.6 per cent and by 10.7 per cent for asset finance.